In the first of our three-part series, I chronicled the need to deliver financial wellness. This need is driven by the employee’s desire to improve their financial literacy and reduce their stress, combined with the understanding that offering financial wellness provides multiple benefits to the corporation.
These factors could lead to the conclusion that we are well on our way to success.
Unfortunately, it’s not that simple. Moving from the desire to provide financial wellness to the actual execution of a strong program presents many hurdles—for both plan sponsors and consultants.
One of the biggest challenges is creating a clear, agreed-upon definition of what financial wellness really is. While preparing for a speech in Atlanta last year, I was charged with the task of defining financial wellness. I began my research by looking up “wellness” on Wikipedia. Interestingly, the concept of “financial wellness” was not mentioned. I then reviewed the 2017 PwC Employee Wellness Survey and found the following:
“Across all generations employees told us that financial wellness means freedom from financial stress and debt, enjoying life, and being prepared for emergencies. Surprisingly, very few employees of any age define financial wellness in terms of retirement, which has historically been the focus of most employer financial education programs.”
I found this fascinating because, as an advisor, my definition of financial wellness would focus on the short-term issues, such as cash flow and debt, combined with the long-term view, the need to plan for a successful retirement outcome. This is when I had my “aha” moment: although we are all using the same term, “financial wellness,” we don’t mean the same thing.
Financial wellness is often defined by the person answering the question. In the search for a proper financial wellness solution, there are many voices in the room—the plan consultant, the HR/benefits professional, the CEO, the board of directors and most importantly, the employee. Each has a different agenda. The true answer to “what is financial wellness?” lies in the combination and collaboration of all voices.
Another huge hurdle facing effective implementation of a financial wellness program is defining the objective for providing it. This is particularly true for advisors in the retirement plan space.
When I spoke at the Excel 401k conference last year, I started out by asking the 80 advisors in the room to respond to a quick survey. The questions I asked were a direct result of speaking with a number of the advisors who had participated in our nine-month study—not just to gauge their reaction to the results of the study, but also to ascertain what their interests were with regard to offering financial wellness.
The choices were as follows:
- To connect better with the plan participant
- To connect better with the plan sponsor
- To protect the existing book of business
- To uncover new opportunities for new AUM with the plan participants
- To attract new plans
- To provide more comprehensive financial education
- To motivate the plan participant into action
- To do “the right thing”
- Unsure
The most popular answer was “unsure.”
So, we have a conundrum. We know employees need financial wellness. We know they are hungry for financial literacy and desire to reduce their stress. But the size, scope, mission, capacity and ability to incorporate a wide-ranging financial wellness program presents challenges for most advisors.
Research and trending data suggest that financial wellness will be more available in corporations within the next five to 10 years; however, the plan consultant is still struggling with converting the idea to proper execution.
Further complicating progress is the fact that, even if the advisory firm can define a baseline for financial wellness and confirm why they are offering it, the plan consultant then needs to find a way to connect with their plan sponsors. And therein lies another set of challenges, including but not limited to:
HR/benefits personnel in most firms consistently struggle with “bandwidth” issues. There may not be enough resources, time or money to offer an extensive new program such as financial wellness.
Gaining support and commitment from senior management. Without direction from the top, it may be difficult to find the champions necessary to get proper traction within the organization.
The need to benchmark. Corporations are used to measuring the success of “health” wellness programs. It is easy to understand if one walked 10,000 steps or lowered their weight or cholesterol number. With financial wellness, measuring a successful outcome is more complex.
Engaging employees. Industry experts gauge that, even when programs are in place, only 7 to 15 percent of employees actually utilize the tools offered.
Despite these challenges, all is not lost. Studies show that more corporations will be offering financial wellness in the future—even more important is the reason why. In a 2016 report by Aon Hewitt, the #1 reason employers will be offering these programs is that it’s “the right thing to do.”
For financial advisors, one last challenge to implementing these programs is to determine whether to create their own or buy one off the shelf. Even if the firm answers all of the strategic questions and comes to the conclusion that financial wellness is worthwhile to offer, then tactically, what do they provide to their plan sponsors?
To create their own program is an enormous task, both in terms of time and money. So, often, the advisor is looking for an appropriate solution that keeps them at the center of the relationship with the plan sponsor and plan participant and that’s consistent with the type of advice they would offer. From my conversations, it appears this is still a big problem.
We are left with some important questions: Is financial wellness just too big? Is it worth the advisors’ time and effort? Does it make sense to pursue this, or is it going to distract from the overall mission of the firm? There are so many questions that could truly define success or failure for many firms, as we look at the changing landscape of the retirement plan business.
In the next and final part of our series, we will reveal the results of our nine-month initiative, which showed an alternative approach to delivering financial wellness.
Mark Singer, CFP®, AIF® is the President and Co-Founder of Financial Literacy Toolbox. Mark is a leader in the world of financial education. Mark is the author of three books, a frequent speaker at events, and is the creator of The Financial Literacy Toolbox, a virtual resource center to help financial advisors, wellness providers, and institutional retirement services firms change the conversation about financial wellness.
